Around 90% of the world’s carbon emissions are not priced at a level that truly reflects the cost of climate change.
That’s according to the Organisation for Economic Co-operation and Development (OECD) which analysed carbon emissions in 41 OECD and G20 countries, which together account for 80% of all emissions from energy use and CO2.
Carbon pricing is the amount that must be paid for the right to emit one tonne of CO2 into the atmosphere.
It said 60% of emissions from energy use are not priced.
It also found effective carbon rates – the price resulting from taxes and emissions trading systems – in those countries are low in the electricity, commercial, residential, offroad transport, agriculture and fishery sectors, which in total emit 85% of carbon emissions.
Around 70% of emissions from these sectors are not priced and 4% is subject to a price above €30 (£25.8), according to the report.
However, the road transport sector has high effective carbon rates with 46% of emissions above €30 per tonne and only 2% unpriced, the OECD adds.
It recommends a carbon price of at least €30 per tonne to reflect the true cost of emissions and introduces a new indicator – the carbon pricing gap – which considers the difference between the price each tonne of carbon emissions faces and the €30 per tonne figure.
The current carbon pricing gap is 80.1% across the 41 countries surveyed.
However, if all countries increased carbon rates to €30 per tonne, it could narrow the gap from to 53.1%, the report states.
Angel Gurria, Secretary General at OECD said: “We simply cannot afford, environmentally or economically, to get these policies wrong. The carbon clock is ticking – our world needs higher effective carbon rates now, before time runs out.”
According to a report by Carbon Disclosure Projects, more companies are using internal carbon pricing.